Residents have two main tax issues they need to think about in Spain. One is the local property tax or IBI (which is what you will see often on a direct debit), commonly known as SUMA. This is due at different times of the year, depending on where you live, but is paid once a year and usually you would set up a direct debit. On the Orihuela Costa, we pay it September/October time. This is a local tax used for maintenance of infrastructure, parks and leisure areas.
The second issue is whether you pay income tax in Spain. If you need to make a Resident tax declaration, then you need to complete this before the end of June each year (although it is better to do it a little earlier). This declaration covers the tax year the year before from 1st January to 31st December, so this June 2015 we are looking at the period of income earned in the calendar year of 2014.
In your Spanish declaration, you need to declare all world-wide income including rental income, interest received from savings and capital gains from the sale of a house or other assets.
You may be aware that some civil service pensions have to be taxed in the UK as tax is deducted at source. You will not be taxed on this twice; it is taken into consideration.
You are fiscal resident in Spain if you live half of the year plus one day in Spain. If this applies to you, then you should check if you are obliged to present your declaracion de renta or not depending of your personal income, as in some cases you do not need to.
Employees in Spain on a contract already have a “retention” from their salary so you should have the predicted tax already deducted from your salary and sometimes may even get some back. If you are self-employed or “Autonomo” it is a different system and tax is paid quarterly. You really need an accountant and we can help with that. Again at the end of the fiscal year, there will be an adjustment and you may even get a bit back.
There are personal allowances on which income within the bands will not be taxed.
There are also allowances for children, elderly relatives living with the family with income less than a certain amount, and incapacity allowances. It is best to arrange an appointment to discuss these.
It is quite complicated to work out whether it is better as a husband and wife to present a joint return or individual returns and also to make sure that all the correct allowances are used. It is always best to get advice from a professional to make sure you are doing your taxes the best way and are properly compliant.